Mining tax regime is final – Chikwanda

1. We need to automate a lot of functions at ZRA using latest technologies. That will not only increase productivity but also efficiency. Despite collecting close to ZMK3 billion last year, we could have increased revenue by another 20% with efficacy.

   Otherwise we are moving in the right direction, a strong tax regime with a robust monetary policy are two powerful engines on both wings of our national Dreamliner capable of alleviating poverty among the most vulnerable smart people of the Zamian Enterprise.

   I like what I see …

   • What do you know about the technology they are using at ZRA? When the rightful Criticles Mwansa headed that ZRA, technology shoot up… unfortunately RB removed him because the guy could not tolerate theft. You can refer to something else like the terrible leadership of Msiska.

   • The roots of Zambia’s developmental crisis—and the hopes for its renewal—are political and institutional. The overriding imperatives are to strengthen state structures, and to implement procedures for greater transparency and accountability in governance. Period! The basic economic principles are clear, and more effort is needed to educate our policymakers and the publics about their compelling logic: kwacha should be convertible, tariffs low, barriers to market entry and business incorporation low or nil, taxes low…….NOT RAISING THEM!

   • The card is being played by the wrong hand. Taxes are supposed to be worked out and imposed by Parliament. That is their babyyyyyyyyy!

     How may places are we going to make laws?

     Last time I checked there were supposed to be two. Only twooooooo!

     In parliament and in court. Capwaaaaaaaaaaaaa!

2. A lot of money is collected but this impotent Pf govt does not know how to utilize taxes efficiently.

3. Great stance, and good that it is still with reasonable flexibility.

4. By the way, I Thought Lungu told Zra to discuss with the mines about the taxes. Now chikwanda is saying no room for discussion. Very confusing. Anyway that’s how of operates. Even sata it was the same.

5. Efficiency increases revenue collected. Let the border post be open 24/7. This will help to decongest the borders.

6. Poor man has no other means if raising money for the bankrupt economy. Micheal Sata is resting in peace after he created a mess by unplanned budgets and now ABC has run out of solutions

7. Revenue from copper was bound to deplete at some point. Besides after so many years of exploiting the one major source of income we are facing another copper price crisis created by the LME. Unlike most businesses where the longer you operate the more you realize by taking advantage of economies of scale with mining it is many times the case that the deeper you go the more expensive the extraction gets. At some point these investors will accept to cut thier losses and walk away. Copper is abundant in neighbouring Congo and a lot less expensive to extract because it is closer to the surface and they have an investor friendly tax system. The PF will find itself with a whole bunch of copper and no technology and capital to extract it. We are headed for a crisis and we need leadership now.

   • Good summary but the country is in the hands of drunken PFools. We need some mines to close before they realize what a stoopid tax system they have introduced.

   • Correction – Congo is lawless and basically tax-free and about 6 million people have died there in the last decade or so… Just to get some perspective on things, unless you want to move to Congo because things are so great in Congo? Go ahead

8. This man is a disaster. How do you say that you are implementing a tax just because it is easy? This is laziness of the worst kind. The Govt was supposed to consider the long term impact of the tax on mining investment. the only mechanism to recoup capital investments in Zambia is the current income tax. Given that it has been abolished, I fail to see what other ‘mechanisms’ our minister is talking about

   • You don’t seem to understand the extent to which the mines try to avoid paying tax. What ABC is doing is the best to deal with these mines.

   • ABC is right. The problem is Zambians CEO in mining companies and mines chamber of commerce who mislead government on taxes. They argue that new taxes will deny Zambians investments in mining sector. This is not true. Investment that comes is huge equipment that extract ore such that life span of mines which could be 30 years reduce to 15 years meanwhile no taxes paid. This is what ABC is curbing. Well meaning Zambians have seen sincerity on this model by Government

     Mutatis will tell you how through transfer pricing mining CEO get huge commissions as personal reward for helping mines steal from Zambians. The formula the govt has come up with is so far the best to curb fraudulent accounting. So support the Government.

9. Figures speak louder than words. I know from LME site Copper is now selling around US$2.50/lb. (i.e. US$5,600/Tonne in metric terms).
   also know that in the ZCCM days copper production cost used to be approx US$1/lb ( US$2,200/Tonne).

   My question is:- What is the current production cost now? Anybody? Or is it a closely guarded secret?

   • This old man must retire. He does not understand the complexity of the economy. The world has evolved. He still thinks of 1970s economy..shame.

   • at my mine, we are at $2.8/lb. and with this tax regime, we are headed for massive job losses. for our operation, its not profitable to run the business under the current circumstances. we just paid the same 20% tax in January and our cash flow is in the negative. come march, we’ll have dramas

   • US$2.80/lb?? Mr. Chitimukulu, advancement in technology the World over brings about reduction in costs of doing business, NOT increase it. You guys are using better technology than ZCCM did. Who on earth can you be the only exception in the World?. I smell a rat. A big rat.

10. Maybe he was busy drinking his “ka good, red French wine” when the President directed ZRA so he didn’t hear about it – or maybe he just forgot what he was doing and which millennium we are living in currently… Ba UNIP

    I agree with the simplicity aspect of the tax arrangement, but the numbers are confusing – why the enormous difference for open cast mining? And why the early 1970s era expectation that the copper price will keep rising and the ka good French red wine will just keep flowing by itself?

11. Yes sir, we need strict and firm leaders with regard to tax regime with the mines. In the colonial era, foreign bodies made the calls over local resources. Without firm leadership we will be at the end of the line bowing to those who come to reap in the name of partnership development. President Lungu’s statement that government is ready to discuss was not so affirming to many Zambians. Multinationals have stolen enough. Thank you for clarifying the matter.

12. There is no fiscal management of all the revenues collected by this Govt.

13. It’s going to be very tough for PF to pull through the coming elections, reason being that his time is so short to do some work for the nation to say yes let’s give him a chance to carry on. The biggest issue to start with, the government will not manage to meet the budget deficit for the 2015 fiscal year on account of the presidential election spending and unplanned-for expenditures. The government has already spent a total amount of K344 million which was requested from the Treasury, which was allocated and spent on the January 20, 2015 presidential election. We are already in 2015, so this amount of money spent was part of the 2015 budgetary expenditure, which in addition to other unforeseen expenses, puts a strain on the K46.7 billion 2015 national budget. This will result in…

    • This will result in cutting costs in some other expenditures that were already planned for knowing the late president (Sata ) was going to carry on. If PF has all the power to work this out, from the beginning they should have let Guy Scott continue acting as president to buy more time to show that they have done some work until next elections in 2016, now with this situation it brings Mr Lungu in a very tight situation, he won’t be able to enjoy the office, soon he has to go back on campaigning. This government is going to face higher-than-projected budget deficit to GDP because of the elections. When you look at over K300 million that was allocated to the ECZ, these are not the only monies that went towards elections. This year and next will be challenging years for the government

14. This year and next will be challenging years for the government in terms of trying to provide for other social and economic activities. Another downside is what’s going on with the mines, Lumwana mine is threatening the government to close down because of that tax increase. If the mines continue behaving the way they are, it is true, revenue collection to this year’s national budget will reduce because if you look at the trend in the copper prices, they are going down. The best way is to hold the mining tax for now let people continue working as part of the manipulation, because if Lumwana pulls out, it won’t be good, and these guys can do it, they have money and they are business people, they are here for that reason they don’t care about the employees, but what they can get from…

15. Guys,
    The most efficient mining company in Zambia, First Quantum, is producing at $1.57/lb at Kansanshi. That figure will drop as cheap acid is generated from the new smelter and they start leaching high gangue-acid ore. Others in my view could come in at <$1.80/lb, with astute management.
    Forget about DRC, it is different playing field. Rumour has it that Glencore is about to buy out ENRC at their Frontier and KMT projects. We know how ruthless and unscrupulous Glencore could be! Unfortunately, they own Mopani.

16. Do not blame the PF government for failure to collect enough money from the mines. This has been going on since independence. This is the reason Unip nationalised the mines but unfortunately we failed to run them: ultimately we had to re privatize them. I also want to point out that our so called engineers are just on paper. I was amazed to hear this engineer on TVZ supporting the mines basing his argument on the falling price of copper. I wondered if this fellow knew that it is not only copper that these mines produce. Currently cobalt which is produced abundantly in Zambia is trading at more than U$30,000 per ton. Besides we are not asking for a fixed figure; we asking for a percentage- which means that our take we depend on the final sales of copper. Many organizations abroad have…

17. This guy nominated MP Hon Alexender Chikwanda is undermining our president, EL. He is behaving like he is also a president. The republican president has already spoken about this issue in a very positive manner. But why is this kolwe, Chikwanda always threatning the mines with his talking??? Shut up, man!!! After all you are just a nominated MP and you will have nothing to lose. His Excellence Edgar Lungu must be careful with this man.

18. . Many organizations abroad have revealed how some mining houses are evading paying the right loyalties to the government, but here are Zambians who pretend that this is not happening.

19. Yes,
    We are aware of the plundering in DR Congo
    Glencore
    Traffigura
    Freeport
    ENRC
    Malta Forest
    Are all in a clique. Bribing their way to the topmost man in Kinshasa.
    Unfortunately, they have spilled over into Zambia.
    Glencore owns Nkana and Mufulira
    Freeport owns Zamefa, and
    ENRC owns Chambishi cobalt plant
    With this in mind, the mining tax MUST REMAIN!

20. Typical…..biting the hand that feeds you! Why push up taxes, forcing the mining companies to close down bcoz they become unprofitable and we loose our jobs! If the government want more money they should stop wasting it and stop corruption.

    • Who told you the mines will close down at copper price US$6000/ton?

21. Just position Mr. George Siame as a Consultant at MOF and revenue will increase!!!! This idea of flushing out competent people must stop.

22. So are there negotiations or not? Imwe ba PF, don’t speak in parables, there are jobs and a youth called Zambia at stake here. Already our copper production has declined drastically, literally going the opposite direction to what was projected. Silly reasons for this have been advanced by technocrats when we and the facts are staring each other in the face!

23. Who told you copper is selling at $6000/ton?

    • It is not only copper- what about cobalt?

24. What about cobalt?

25. Prices:
    High purity cobalt (vacuum refined), as is produced at Chambishi, is fetching $30 000/tonne. Zambia and DRC control the market
    LME grade A copper, as is produced by Kansanshi/KCM/Mopani is commanding $5 688/tonne
    These prices were start of trading in London today.

    • @Mining Economist,
      As you know, the picture is incomplete until you take into account the production cost. Chitimukulu at @9.2 above says at his mine the production cost is US$2.80/lb. Now, thats a jaw dropping cost, considering that, as I said @9, copper production in my time (ZCCM) used to be approx US$1.00/lb.
      I am an Engineer, and I can tell you that, like for like, a cost of US$2.80/lb does not make sense because advancement in Technology reduces cost of doing business, NOT increase it. So, I do not believe this shocking cost.
      So, ba Mining Economist, please tell us what is the correct current production cost of Copper in our Country? Do you know? Does anyone know? I know its bound to vary slightly from Mine to Mine, but within reason.

    • @25. Mining Economist,
      As you know, the picture is incomplete until you take into account the production cost. Chitimukulu at @9.2 above says at his mine the production cost is US$2.80/lb. Now, thats a jaw dropping cost, considering that, as I said @9, copper production in my time (ZCCM) used to be approx US$1.00/lb.
      I am an Engineer, and I can tell you that, like for like, a cost of US$2.80/lb does not make sense because advancement in Technology reduces cost of doing business, NOT increase it. So, I do not believe this shocking cost.
      So, ba Mining Economist, please tell us what is the correct current production cost of Copper in our Country? Do you know? Does anyone know? I know its bound to vary slightly from Mine to Mine, but within reason.

26. Gold is fetching $1 265/ troy oz

27. Brothers and sisters….we must remember one thing….the world does not need our copper or its by products…but we need the world to buy our copper. We should stop having this over inflated opinion of ourselves that everyone wants our copper. Our mines are very small in the overall picture of these big mining companies. All companies are in business to make money….whether it be Zambian or foreign. If they are not making money, why stay in business? Why should they care if Zambians lose their jobs and cannot feed their families? If the government needs more revenue in order to deliver on its promises, then they should stop wasting the resources that they have and stop corruption. Can anyone here tell us how much corruption has cost our country and our people?

28. We Zambians a naturally wasteful:
    1) Electricity- just because we have paid for it we don’t switch off forgetting that this power does not just fall free from heaven. Money is spent to generate it from source to the point of use. We forget that users are more than the capacity therefore we must use it prudently so that all of us can benefit without inducing POWER CUTS.
    2) Fuel – Just because I bought it with my own money I can drive all day even when it’s not necessary. Rich countries normally encourage families to use one car unlike here in Zambia where one family will have each member driving in separate vehicles. Government spends a lot money to bring this commodity in the country and the less we use it the more money we save for other important assignments.
    3) The Mines were manned…

    • @ Ndaje Kahks

      I can’t add anything to this. You put it very well. Let those with eyes, see, those with ears, hear and those with brains, think.

29. This is not DRC where allegedly minerals can virtually be found on the ground surface, ready to be picked up. The costs involved to extract our minerals is eye-watering and that’s before figuring in capital costs to extend the lives of these same mines. ZCCM left these mines without extensive investment in capital, no new technologies to speak of to improve efficiency of mineral extraction so these investors have had to make up for this.The heady days of $8,000/t are well behind us and unlikely to return as it seems China which buys almost half our copper has reached saturation point. ABC and friends are choosing to ignore the fact that the price of commodities has gone down. Also how do you hike tax on Open Pit mining just like that as if the copper is ready for sale right then &…

30. there? This government needs to be serious. It’s their own fault that they don’t even have a single industry which they can point to and claim they have created or revived with the creation of X number of jobs created and x amount of dollars in tax revenue being collected to boost our coffers.Nothing but a world of trouble on the way if this continues I’m afraid.

31. Umukuba taubola. Thanks for keeping the new mining tax.

32. @25. Mining Economist,
    As you know, the picture is incomplete until you take into account the production cost. Chitimukulu at @9.2 above says at his mine the production cost is US$2.80/lb. Now, thats a jaw dropping cost, considering that, as I said @9, copper production in my time (ZCCM) used to be approx US$1.00/lb.
    I am an Engineer, and I can tell you that, like for like, a cost of US$2.80/lb does not make sense because advancement in Technology reduces cost of doing business, NOT increase it. So, I do not believe this shocking cost.
    So, ba Mining Economist, please tell us what is the correct current production cost of Copper in our Country? Do you know? Does anyone know? I know its bound to vary slightly from Mine to Mine, but within reason. .

33. Cactus the spectrum is from $1.57/lb at Kansanshi (expected to be dropped to about $1.30/lb when acid is obtained from the new smelter, to leach high gangue-acid ore) to an abysmal $2.96/lb at Lumwana. The other guys are in between. Baluba and Nkana have the blessing of a cobalt credit, which reduces their production cost by about $0.20/lb. KCM has cobalt at Nchanga, however, they have been able to successfully produce a saleable product. Kansanshi derives a gold credit from copper concentrate exported abroad. They do not declare that to ZRA, but receive a gold credit 3 months later. If accounted for, could drop their production cost by a further $0.10/lb. If ZRA catches up with them, this will be backdated to 2004 and they will incur an impairment of about $950m, in owed royalty.

34. Nchanga have NOT been able to produce a saleable cobalt concentrate

35. Messrs Bantubonse, Mutati and Hamukoma were aware of this gold loophole at Kansanshi, when they were with the Chamber of Mines, yet they kept quiet. A way of appeasing their paymaster, one surmises!

36. HH to enter the Guiness Book of Record as one of the Politicians in the Whole world to have stood for Presidential elections for over 30 years and not succeeding but dying rich.This is according to the recent proposal for inclusion in the Gigantic Book for 2038.

37. Mining Economist,
    Thanks for the figures. US$2.96/lb?. Shocking. There must be a rational explanation why production costs are so high now as compared to ZCCM days. Factored in new machinery I guess? Hence its like comparing oranges to apples?. That elusive rational explanation, whatever it is, out strips cost savings accrued thru better technology. And that explanation CANNOT be attributable to labour force because ZCCM employed about 55,000 people, whereas I gather these Mines’s total labour force is less. So, what on earth is going on? I smell a rat to be honest.

38. Yes,
    Mining cost at Lumwana is high, it is wet so:
    1) ANFO cannot be used for blasting, emulsion has to be used, 2-3 times as expensive
    2) The trucks skid climbing up the ramp, getting out of the pit. Load factor is therefore lower
    Transport cost to the smelters is high, being:
    1) Far from the copperbelt
    2) Linked with an abysmal road, so transporters charge a premium
    Input costs are high, as:
    1) There are no rail networks to bring in mill balls
    2) Mining chemicals have to be brought in on that appalling road
    3) Diesel has to come through the same route. The long and dismal stretch of road induces theft of diesel
    The cost of expat labour is the highest in the world
    They do not screen their expat employees eg the plant manager failed in:
    Indonesia
    Turkey
    Vietnam,…

39. In fact, at its peak, ZCCM had 60 000 employees. Then they owned Manchichi Bay, Kasaba Bay, Nkamba Bay lodges, Mulungushi Traveller, Mpelembe Drilling, Ndola Lime, Several branches of Nchanga Farms, Antelope milling, 3 nerve centres, Nchanga House, Mutondo House and Kalulushi plus Lusaka head office.
    Had ZCCM stuck to the core business of mining, and invited overseas partners, it would have been running close to Codelco in Chile or Vale in Brazil today!

40. The process manager who oversaw the construction of the Lumwana concentrator, is a butcher in New Zealand today….THAT SPEAKS VOLUMES!!! No wonder it is such an expensive plant to run.

41. Equinox (the founding owner of Lumwana), was an exploration company and were never interested in production. As a result, as soon as the mine was up and running, they were going to sell. This is what they did. Ambassador Nevers Mumba brokered the deal in Canada and got Barrick to buy the mine. Within two years, Barrick realised that they got a raw deal and had to write off $2bn as impairment. If valued today, another write off will be imminent.

42. Peeple…..I’m sure you are all experts in your fields but the bottom line is that the government should stop wasting money and stop corruption. Then we may see an improvement in our resources. We are not a rich country but our leaders waste money on things that benefit them, not on helping the poor father who is trying to feed his family, educate his children, the poor old lady smashing rocks on the side of the road to earn some money so she can feed her children. Dont our leaders feel shame when they see that? Instead they are happy to have some high ranking army/police lady to carry the first lady’s handbag at the airport. Where is our humanity?

43. What about try to do it ourselves without investors, like it was in the beginning during ZCCM, because this will help our economy if only we can do it, and yes we can. Zambia is not poor, it’s the people’s mind that are in high office that have poor thinking. Zambia is Africa’s highest producer of copper and the second in the world, now where does the money go. OMG, even someone who has never been in a four cornered room meaning a classroom. Can figure this out. Let’s bring back the same format the country used to operate ZCCM and do it without investors, this should include every mineral that is being mined in zambia, all those emerald mines that are run by Senegalese and Lebanese should go back to the hands of the zambians, then we can see some development coming in.

44. Alexander,
    I think Zambia is the 5th largest copper producer in the world.
    My recommendation is as follows:
    1) Go for the ZCCM model, but with foreign participation, say 35-40%
    2) Foreign partners are needed in this world of globalisation today. It is a prerequisite when you approach foreign lending institutions!
    3) Only expats with skills not available within Zambia should be recruited
    4) 20% of all profits must remain within the host community, and used for INFRASTRUCTURE DEVELOPMENT…not consumption
    5) Stick to the core business of mining
    6) Start with copper, then diversify into emerald, limestone, manganese, phosphate, uranium, gold
    This will be a model which will stimulate young graduates to strive for excellence, and build a strong and robust Zambia in the process

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